Thursday, May 12, 2011

Legislation is being introduced on a bi-partisan basis that purports to replace Fannie Mae and Freddie Mac with five private firms:

"Two lawmakers, a California Republican and a Michigan Democrat, are set to unveil legislation Thursday to replace mortgage giants Fannie Mae and Freddie Mac with at least five private companies that would issue mortgage-backed securities with explicit federal guarantees" LINK

Someone please explain to me how THIS changes anything? A Government guarantee only enables extreme moral hazard. And moral hazard is moral hazard whether it's a giant Government beast being completely plundered and riddled with fraud under the stewardship of political animals like Franklin Raines or administered by total private sector thieves like Angelo Mozilo or Charles Keating. The only difference is that one - Raines - is a product of the political system whereas crooks like Mozilo and Keating buy their own politicians.

Both set-ups are recipes for disaster and massive transfer of middle class taxpayer wealth to those who benefit from the explicit federal gurantees.

Fannie Mae just recently posted another massive loss and has requested another $8.5 Billion in aid from Obama - this is at least the fourth time FNM will have been given your tax money, the total is now in the 100's of billions, and it's 3x larger than the request made just a few short months ago LINK There's surely some correlation between between the FNM/FRE bailout requests and the Treasury's repeated requests to lift the debt ceiling.

Here' my explicit guarantee: if FNM/FRE are transferred into 5 private companies, we will see 5 times as many bailout requests every quarter and we will get to subsidize the salaries and bonuses of the people running those companies just like we do for the people running Wall Street banks. There will be no difference. Fannie and Freddie should be completely shut down, let the banks (shareholders and upper management) who dumped the crappy loans onto the Government balance sheet take the losses and the Government should get the hell out of the business of making loans to homebuyers.

Update - here's what Government guarantees/moral hazard have created: Delinquent homeowners in NY/NJ go three years living with their defaulted mortgage without making any payments. Here's the LINK

5 comments:

This is a chart illustrating the effect of long-term deflation/devaluation of bond investments caused by what is portrayed as inflation. It is the key to understanding gold and private assets in the future. There is just no possible way to even break even investing in government debt of any nation. Selling public debt is the greatest fraud of all time and it is no different than what Madoff was accused of and sentenced to die in prison.

As long as government is the ONLY party who can file charges, there will be corruption and a thriving oligarchy to control government to (1) prosecute enemies and (2) to prevent their own prosecution. We have to understand the nature of the beast in order to prepare for the future based upon simply what always unfolds under these circumstances. This is the real driving force behind the shift from PUBLIC to PRIVATE assets on the horizon.

Just as the Borgia, Medici, and a host of Kings over the centuries, all sought to grab the Papacy and install their handpicked candidates who were never men of God. They exploited religion to justify their desired power just to control the politics. Remember Thomas Becket who was a friend and appointed archbishop by the king to allow the king to tax and prosecute clergy for money. Becket was not a priest, but he found religion and opposed the king costing him his life right in church. The same is true today with the bankers who have infiltrated government to ensure their House Always Wins. Most of history is lost in the propaganda.

For example, they say the pope refused Henry VIII a divorce. The truth is Henry VIII’s wife the Holy Roman Emperor’s aunt, Catherine of Aragon. The emperor imprisoned the pope and there was no way he would grant the divorce with the Emperor’s gun pointed to his head. The bankers today have infiltrated government to such an extent, that we have lost all sense of for the people by the people. It is now for the oligarchy and by the oligarchy. This is why we are really screwed.

GoldMoney’s James Turk interviews Sprott Asset Management’s John Embryabout the recent turmoil in the precious metals markets, suppressionof mining share prices, inflation around the world, the ignoring ofinflation in the United States, the possibility of hyperinflation, thepolitical polarization demonstrated by Canada’s recent election, andseveral other subjects. Embry’s advice to investors: Buy the dips inthe precious metals, don’t worry too much about the smashdowns, and avoid leverage, since you’re up against forces with infinite leverage.Turk and Embry will be speakers at GATA’s Gold Rush 2011 conference in London in August (http://www.gatagoldrush.com/). The interview is 30 minutes long and you can find it at the GoldMoney Internet site here:

In addition to managing their portfolios the two additional responsibilities of the GSEs should be handled separately. The private sector must be encouraged to replace the GSEs financial activities including a private market for MBS and covered bonds.

Eric Arthur Blair aka George Orwell

"Hope" is not a valid investment strategy

Full Time Jobs Over Last 5 Years

Is Your Gold Missing?

Why Gold?

Gold is the world's oldest currency. You exchange your fiat currency (dollars, euros, yen, yuan) into gold as an insurance policy against catastrophic Central Bank and Government policies which serve to destroy the value of fiat currencies and destroy democracy.

Gold can ONLY be considered an investment to the extent that it remains significantly and historically undervalued in relation to the fiat currencies against which its value is measured. Otherwise it remains the world's oldest currency and is completely free from the counterparty risk associated with currency by Government fiat (i.e. fiat currencies rely on a Government's "full faith and credit.")

Epic Quote - "Jesse" Sent This To Me

"The world will soon wake up to the reality that everyone is broke and can collect nothing from the bankrupt, who are owed unlimited amounts by the insolvent, who are attempting to make late payments on a bank holiday in the wrong country, with an unacceptable currency, against defaulted collateral, of which nobody is sure who holds title." - Anonymous

The Basic Fundamental Problem

What's the solution?

“THERE IS NO MEANS OF AVOIDING THE FINAL COLLAPSE OF A BOOM BROUGHT ABOUT BY CREDIT EXPANSION. THE ALTERNATIVE IS ONLY WHETHER THE CRISIS SHOULD COME SOONER AS THE RESULT OF A VOLUNTARY ABANDONMENT OF FURTHER CREDIT EXPANSION OR LATER AS A FINAL AND TOTAL CATASTROPHE OF THE CURRENCY SYSTEM INVOLVED.”

Ludwig von Mises – Austrian Economist (1881- 1973)

Quote Of The Month Courtesy of "Jesse"

Unfortunately for Larry Summers, Ben Bernanke, and their friends at the BIS, they have not yet figured out how to print physical gold, silver, and other essential commodities, and the world is reaching the point where it might simply start ignoring the New York based markets with respect to essential commodities such as basic materials, oil, foodstuffs, and the like, as they become increasingly irrelevant, fraudulent, and Orwellian. And then where will the financial engineers be, except with no more excuses and no place to hide?

Great Quote From Jim Rogers On Govt CPI Reporting

JR: I mean, we have inflation now. If you go to the shop, whether it’s groceries, or education or insurance or health care, prices are going up for everything. The government lies about it in the US. Some countries lie, many countries don’t: Australia, China, India and Norway. Many countries don’t lie about it and acknowledge that we have inflation. Others lie about it, the UK and the US, but if you go shopping you know prices are up.

Q: Are you saying that the American Consumer Price Index (CPI) published by the US Bureau of Labor Statistics is a lie? JR: In my opinion, yes, of course it is. Have you looked at it? They’ve changed their accounting several times in the past few decades. When housing was 20% to 25% of the CPI and housing was going up, they didn’t count it, saying rents weren’t going up, and then when home prices started going down, they counted it. It’s the same with many things. It’s staggering some of the tortuous reasoning that the BLS has used over the past 25 or 30 years. When the price of gasoline goes up, they say it’s not really going up because it’s better gasoline, better quality, therefore you’re getting more for your money. I mean, it’s endless, the stuff that they say and for some reason people sit there, although more and more people are catching on, and accept what the government says.

Priceless Quote From Richard Russell

On Larry Summers: This doofus practically ruined Harvard when he headed it. I can't think of a worse choice to be chief economic advisor. I wouldn't trust Summers to manage a Starbucks franchise.

Quote of the Week

"The primary function of a Central Bank is to engage in the massive transfer of wealth from the middle class to the wealthy elite. The Federal Reserve was set up to do this with the blessing and support of Congress." - Dave in Denver

If you refuse to believe the above, please read "The Creature From Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin and then explain to me why the Senate voted down the Vitter Amendment and Congress refuses to pass a law requiring a full audit of the Fed, even though the Fed is using taxpayer-backed money to bailout Wall Street and Europe.

Quote of the Month

And very relevant in the context of yesterday's post about gold moving higher against all fiat currencies:

Just imagine what would happen if a mere ten percent of the money currently going into bonds were instead to go into gold. As in 1972, the real move has yet to begin.

- Murray Pollit, Pollit & Co.

A Picture Says It All...

www.moneyandmarkets.com

Golden ore samples produced by Eurasian Minerals

Undisclosed exploration site

The Next Reserve Currency?

1 oz. Chinese Panda

Guess who said this?

Rising prices of precious metals and other commodities are an indication of a very early stage of an endeavor to move away from paper currencies...What is fascinating is the extent to which gold still holds reign over the financial system as the ultimate source of payment.

-Alan Greenspan, 9 Sep 2009

THIS is what REAL money looks like

1 oz. Gold Eagles

Alan Greenspan said what?

“Deficit spending is simply a scheme for the ‘hidden’ confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.”

From "Gold and Economic Freedom" a 1966 Essay by Alan Greenspan

About Me

I spent many years working in various analytic jobs and trading on Wall Street. For nine of those years, I traded junk bonds for a large bank. I have an MBA from the University of Chicago, with a concentration in accounting and finance.
Currently I co-manage a precious metals and mining stock investment fund in Denver.
My goal is to help people understand and analyze what is really going on in our financial system and economy.